UBS: NAB to cut dividend, sell it

Via UBS’s excellent Jonathon Mott:

NAB announced on Thursday that it will take an additional $749m pre-tax charge for increased provisions related to its customer remediation program, 91% of which is wealth related and the remainder banking…Importantly, NAB is yet to provide for customer refunds related to aligned advisers. NAB has the highest number of aligned advisers across all the major banks at ~1,000 planners, and we believe there are material risks for significant provisions as the review progresses.

The additional remediation charges announced by NAB reduce CET1 by a further 13bp. We now estimate NAB’s 1H19 CET1 ratio at 10.61% as at 1H19, sitting only marginally above the 10.5% ‘unquestionably strong’ threshold. However, NAB’s capital position is expected to come under further pressure from additional remediation charges for aligned planners (likely in 2H19E) and it potentially faces ~NZ$5.9bn capital shortfall in New Zealand if the RBNZ’s proposals are adopted (announcement due in September).

Dividend now expected to be cut to 90cps per half, with risk of a cut to 85cps… we maintain our Sell rating.

Houses and Holes

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the fouding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

Comments

  1. Know IdeaMEMBER

    The Big 4 do not decrease dividends. That is so simply un-Australian that it would have to be illegal.

      • Not in Australia. There’ll be a bail in of deposit funds to protect the banks and superfunds.

        The legislation has already been passed.

      • I was under the impression that the Rudd government guarantee had a nexpiry date and has now since lapsed.

        As for if depositors or shareholders get paid first, the answer is neither. Lawyers and liquidators first cab off he rank, good luck if anything is leftover….